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We present Adjusted EBITDA as a supplemental performance measure because we believe it facilitates operating performance comparisons from period to period, and each business segment’s contribution to that performance, by eliminating non-cash charges to earnings, which can vary significantly by business segment. These non-cash charges include timber depletion, depreciation of fixed assets and the basis in lands sold. We also use Adjusted EBITDA as a supplemental liquidity measure because we believe it is useful in measuring our ability to generate cash. In addition, we believe Adjusted EBITDA is commonly used by investors, lenders and rating agencies to assess our financial performance.

A reconciliation of Adjusted EBITDA to net income and net cash from operating activities, the most directly comparable U.S. GAAP performance and liquidity measures, is provided in the following schedules:

Nine Months Ended September 30, 2012

Operating Income

Depreciation, Depletion and Amortization

Basis of Real Estate Sold

Adjusted EBITDA

By Segment

Northern Resources

$

15

$

20

$

—

$

35

Southern Resources

66

52

—

118

Real Estate

113

1

111

225

Manufacturing

22

11

—

33

Other

14

—

—

14

Other Costs and Eliminations

(47

)

1

—

(46

)

Other Unallocated Operating Income (Expense), net

1

—

—

1

Total

$

184

$

85

$

111

$

380

Reconciliation to Net Income(1)

Equity Earnings from Timberland Venture

42

Interest Expense

(104

)

(Provision) Benefit for Income Taxes

2

Net Income

$

124

Reconciliation to Net Cash Provided By Operating Activities

Net Cash Flows from Operations

$

237

Interest Expense

104

Amortization of Debt Costs

(2

)

Provision / (Benefit) for Income Taxes

(2

)

Distributions from Timberland Venture

(56

)

Deferred Income Taxes

1

Gain on Sale of Properties and Other Assets

—

Deferred Revenue from Long-Term Gas Leases

6

Timber Deed Acquired

98

Pension Plan Contributions

10

Working Capital Changes

(5

)

Other

(11

)

Adjusted EBITDA

$

380

(1) Includes reconciling items not allocated to segments for financial reporting purposes.

Nine Months Ended September 30, 2011

Operating Income

Depreciation, Depletion and Amortization

Basis of Real Estate Sold

Adjusted EBITDA

By Segment

Northern Resources

$

17

$

19

$

—

$

36

Southern Resources

55

37

—

92

Real Estate

134

1

57

192

Manufacturing

12

10

—

22

Other

16

—

—

16

Other Costs and Eliminations

(43

)

1

—

(42

)

Other Unallocated Operating Income (Expense), net

1

—

—

1

Total

$

192

$

68

$

57

$

317

Reconciliation to Net Income(1)

Equity Earnings from Timberland Venture

44

Interest Expense

(104

)

(Provision) Benefit for Income Taxes

—

Net Income

$

132

Reconciliation to Net Cash Provided By Operating Activities

Net Cash Flows from Operations

$

294

Interest Expense

104

Amortization of Debt Costs

(2

)

Provision / (Benefit) for Income Taxes

—

Distributions from Timberland Venture

(56

)

Deferred Income Taxes

(2

)

Gain on Sale of Properties and Other Assets

—

Deferred Revenue from Long-Term Gas Leases

(14

)

Timber Deed Acquired

—

Pension Plan Contributions

3

Working Capital Changes

—

Other

(10

)

Adjusted EBITDA

$

317

(1) Includes reconciling items not allocated to segments for financial reporting purposes.

Quarter Ended September 30, 2012

Operating Income

Depreciation, Depletion and Amortization

Basis of Real Estate Sold

Adjusted EBITDA

By Segment

Northern Resources

$

5

$

7

$

—

$

12

Southern Resources

23

19

—

42

Real Estate

54

—

36

90

Manufacturing

9

4

—

13

Other

5

—

—

5

Other Costs and Eliminations

(17

)

1

—

(16

)

Other Unallocated Operating Income (Expense), net

—

—

—

—

Total

$

79

$

31

$

36

$

146

Reconciliation to Net Income(1)

Equity Earnings from Timberland Venture

14

Interest Expense

(35

)

(Provision) Benefit for Income Taxes

1

Net Income

$

59

Reconciliation to Net Cash Provided By Operating Activities

Net Cash Flows from Operations

$

148

Interest Expense

35

Amortization of Debt Costs

—

Provision / (Benefit) for Income Taxes

(1

)

Distributions from Timberland Venture

(28

)

Deferred Income Taxes

—

Gain on Sale of Properties and Other Assets

—

Deferred Revenue from Long-Term Gas Leases

1

Timber Deed Acquired

—

Pension Plan Contributions

3

Working Capital Changes

(7

)

Other

(5

)

Adjusted EBITDA

$

146

(1) Includes reconciling items not allocated to segments for financial reporting purposes.

Quarter Ended September 30, 2011

Operating Income

Depreciation, Depletion and Amortization

Basis of Real Estate Sold

Adjusted EBITDA

By Segment

Northern Resources

$

7

$

7

$

—

$

14

Southern Resources

21

14

—

35

Real Estate

46

—

14

60

Manufacturing

3

4

—

7

Other

5

—

—

5

Other Costs and Eliminations

(13

)

—

—

(13

)

Other Unallocated Operating Income (Expense), net

—

—

—

—

Total

$

69

$

25

$

14

$

108

Reconciliation to Net Income(1)

Equity Earnings from Timberland Venture

14

Interest Expense

(34

)

(Provision) Benefit for Income Taxes

1

Net Income

$

50

Reconciliation to Net Cash Provided By Operating Activities

Net Cash Flows from Operations

$

137

Interest Expense

34

Amortization of Debt Costs

(1

)

Provision / (Benefit) for Income Taxes

(1

)

Distributions from Timberland Venture

(28

)

Deferred Income Taxes

2

Gain on Sale of Properties and Other Assets

—

Deferred Revenue from Long-Term Gas Leases

(2

)

Timber Deed Acquired

—

Pension Plan Contributions

3

Working Capital Changes

(31

)

Other

(5

)

Adjusted EBITDA

$

108

(1) Includes reconciling items not allocated to segments for financial reporting purposes.

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